tv Street Signs CNBC January 14, 2015 2:00pm-3:01pm EST
>> and s&p back below 2,000. >> street signs starts right now with the fed report coming out. could be a market mover, and keep in mind, brian is up in calgary, so they have the whole oil story covered. we'll see you tomorrow. breaking news right now. steve leesman, give us the beige book. >> the beige book seeing moderate or modest growth. fast e growth is expected. this is not a barn burner of a beige book. in part, because of what we're going to talk about in just a minute, which is widespread concerns throughout this book on the oil price impact. first, let me get to the other sectors that the fed follows here. there were modest gains in consumer spending. that includes a particular line that i thought was interesting. the new york fed saying holiday sales in its region were sluggish, and that kind of dovetails with the december retail sales report we got
today. >> the other thing we watched carefully in this report, residential real estate was flat across the district both in existing home sales and in new home sales. pay roles expanded moderately, and something else the federal reserve watches quite a bit, credit demand did grow as did credit quality. because we have brian talking about oil, i want to show you what the beige book says in detail about oil prices. here's the dollars fed from the district. some energy firms are reporting hiring freezes and layoffs. energy service firms are expecting 15% to 40% declines in demand. over in kansas city, another oil rich fed district. drilling activity, jobs, and cap reported to be significantly lower. then some firms having trouble getting credit because of lower oil prices. finally, in atlanta, which i believe includes louisiana area, there were high inventories
across the gulf coast. this is a rich in poor oil stories when it comes to the beige book today. >> very quickly, we're seeing yields move lower today. particularly after that retail sales report that you referenced, and it feels like bets are being raised and they will not raise rates this year. perhaps the timetable will be pushed further out. is there anything in the beige book that maybe jives with that? >> you don't see the inflation. you don't have much of an increase in wages. you have this uncertainty brought along by high oil prices without -- this is the problem. we've been talking a lot about this. you have all the negatives of lower oil prices, which are the affect of the three districts. i'm not seeing in the work here, in the report here, any kind of plus side from the oil prices. we're not seeing screaming consumer demand. you certainly didn't get that in december, though i will say, remember, october and november were on the plus side when it came to retail sales. overall the quarter looks like a 4% quarter. >> you'll be coming back on our show with your retail -- with
courtney, and i'm not going declare you a winner or a loser because people have to tune in to find out. >> thanks, steve. we're going back up to brian in canada in just a moment's time. first, we have to talk about these markets. it is a huge market day. let's take a look at the dow, first of all. plunging today by over 300 points. from yesterday's high, this is incredible. the index has dropped over 600 points. that equates to 3.6%, and it's currently touching around one-month lows. as for the ten-year, i was talking about yield moving lower today. they were hitting levels lower than last october's panic low and as low as 1.78 on the ten-year. it's currently yielding 1.82, and, again, that is a level that we really haven't seen since may of 2013. dr. copper, it's a barometer of economic health. it's getting a whole lot more attention than usual today. it is at its lowest since july of 2009. bob pasani on the floor of the new york tenning. rick santelli is in the pits in
chicago. the weak retail sales really just twist thad knife in further. >> futures dropped ten points on that retail sales number. that just does not happen intestine. that's not normally a big market mover. take a look at the sectors today. we have no intent to rally at all. 2:00 in the afternoon and nothing. we're sitting near the lows of the day. volume is veering towards the heavy side right now. 2% drops right across the board, and all the big sectors -- financial, energy, discretionary, as well as materials. the banks have been breaking down. banks will normally sell off going into earnings season. it's very typical. this is a worse than normal, so jp morgan, disappointed report. near the october lows. same with bank of america. citigroup is below the october lows at $48. we've had some problems here. this selling off bank index down about 10% this month. that long energy trade and probably high yield weighing on the banks here. we should have a rally in energy stocks. nat gas up 8% today. about time toeld cold weather snap. over ten days ago we should have happened last week.
it didn't. it's finally happening today. swn. nothing is happening. we're not getting any rallies at all, and that's a little bit of a mystery. look at that. down 5%. traders a little concerned with a lack of follow-through on the gas stock side of the thing. disappointment of retail sales. not just lower gas prices, hurting gas stations. we also saw disappointments in general misdemeanor, internet, and electronics, and all the retailers sitting to the down side, and remember, of course, mandy, the consumer in the u.s., the last bastion of global growth, and i think that's what got people concerned. back to you. >> you know the old adage, never underestimate the power of the u.s. consumer. thanks a lot, bob. >> forget about the ten-year. the 30-year bond hitting the lowest level on record earlier this session. what exactly do you think the bond market is telling us? >> i think the bond market is telling us a variety of things. i think it's telling us that the u.s. is a good investment on the
fixed income government side based on where other sovereign yields are or where they may be when the ecb gets busy, and, of course, after that german court ruling. we're going to get some kind of a package. just matters in what area and how much. i think on foreign exchange, you have to be very careful because it looks like the yen is stabilized against the greenback. the most important thing i think 30-year bond prices are telling us is that the global economy even if we're on a grade odd a curve, the best economy in the world. no doubt we are. what's going in the rest of the world that's going to make a difference, and i think the yield curve in particular points all eyes to the notion that one of the biggest bets, if you are trading equities, is the perception of what the fed may or may not do in 2015. >> bingo. you hit the nail on the head. rick, thank you so much. of course, we will have so much more on the markets throughout the show, but right now i want to go northward to brian sullivan who is live in calgary. the corporate heart of cabbeda's
industry. >> what are people saying? >> well, people are a little bit nervous, and welcome, by the way. hello from calgary, alberta, canada. this is the heart of oil country. almost every major canadian oil and gas company is based right here. some people call it the houston of canada. it's got the building boom and job growth that would be analogous to houston, if you would. the reason that we're here is a couple of fold. number one, this is a big part of the oil story. canada produce a couple million barrels of oil a day. on the margin, they are more negatively impacted by the lower prices. you also have about 70 canadian companies that trade in the u.s. 15 of those are major oil and gas companies. this is a direct u.s. market impact as well. let's not forget that canada is america's number one trading partner. it's not china or germany or japan. it is canada. about 18% of all u.s. trade is done with canada. more than $300 billion in exports coming to this country.
if that slows down, if the canadian economy takes a hit, the u.s. could take a hit as well, and let's not forget about the canadian dollar that's down about 20%. all this hour we have a bunch of interviews. let's start off right now hitting directly the oil and gas story. mike rose ceo. i guess -- you're in a suit, and i'm a weather wimp bundled up here. in lehman's terms, what the heck is happening to the price of oil that it loses more than half its market value in six months? >> well, and we're in the unfortunate circumstance where both oil and gas have had their prices cut, you know, almost in half. we think it's overdone in the short-term. i think you're over supplied on the oil side by maybe 1.5 million barrel az day. call it 1% or 2%, and the price has gone down 50%. the reaction to that has been swift and severe with cutbacks in drilling programs. >> you're not cutting back.
>> we cut our budget in december. >> but not oil production. >> no, no. we're actually going to grow this year. >> that's the big mystery. we had meetings and interviews yesterday, which will air later on in the show today. every oil and gas company that we spoke with says they're not cutting oil production. >> we're going to grow in 2015 partly because we had an inventory of 45 wells at year end. we were operating 20 rigs. we've cut back to 16 rigs. we've gone from 20 to 16 rigs. if the price continues to stay low for both oil and gas, we probably cut it back a little further, and then you start eroding your 2016. >> do you see that happening? >> we're going to see what the second half of 2015 looks like, and what's the commodity price horizon. >> what are you projecting? >> well, the current price that we're running our model off is
$75 a barrel. >> we're well below that. >> now, we're 80% gas, but we're use aing higher gas price. we're partly hedged, and our balance sheet, we are only one-time debt to -- >> we have one of the best balance sheets in north america. we can with stand a prolonged slump. we actually don't think that's going to happen. >> you probably can't speak for your competitors, about the like you said, if your projection are in the mid 7 0z or -- your competitors are going to have to slash their budgets again. >> they are. >> they all have already, but another round is going to have to come. >> yeah, we went from 1.6 billion to 1.4 billion. we'll go through to spring break, which is q2, and then we'll decide if we leave it at 1.4 or erode it further. >> you know, 2008 saw price decline. that was different. you had the global financial crisis. most people i've talked to say this is sort of analogous to 1986. the saudis open the taps. they drove almost every major
canadian oil producer down. some of them completely gone. is that analogous here? >> potentially. i was working at a major oil and gas company at that point. i started at shell in 1979, so i saw the 1981, which was partly made in canada price collapse, and that was ugly. there were lots of layoffs. i was just working in e & p in 1986, and i left shell in 1993 to start my own independent career. >> forget about being a ceo. how bad is this potentially going to be for your city, for your province? >> if it persists, it's going to be bad. >> how long would persist be? >> if it lasts into 2016 and you're still with an oil price with a 50 in front of, it it's really going to hurt. >> mike rose, ceo of tourmaline. >> thanks for the invite. sdmri wish it was a better news day. thank you.ery m >> there you go, mandy. again, it's not just how low the price of oil has gone. it's how long it stays at these
levels, and, unfortunately, everybody i met with yesterday off camera, today you just heard it from mike. nobody seems to be projecting a rapid turn-up in prices, and the projections are higher, so another round of major budgetary cuts could be coming for some of the major producers. not just here, but in the states as well because a lot of the balance sheets are the same. >> and certainly so many more implications, not just for the energy companies themselves. it's home prices, real estate implications, employment inl politicses. we'll get to all of those facets later on in the show. we'll be back in a second. we are tackling this big market prop on two fronts. we're also over what the bond market is telling us about what is to come, and also what the stock market is telling us. also, later on we're going to be crowning the winner in that big holiday retail reports. who got it right? stick around to find out. right now the 2,000 mark has been broken for the s&p 500. we're sitting at 1996 down by 1.3%. do not go away.
investing in bonds is john, manager and director with the armored wolf. john, why do you think that as low as u.s. bond yields already are they can still head lower? >> well, you know, right now in germany yields are 42 basis points for ten years. that's spectacularly low. i think we understand why that's the case in germany. we have similarly low rates in japan. even lower rates in places like switzerland. the u.s. inflation rate is falling. crude oil prices are falling. u.s. bond yields are among the highest bond yields in the world. there is room on the down side for the bonds to rally. even from these low yield level wrshz. >> how much lower, john? would you be calling a bottom this year? at what level do you think for the ten-year? >> well, we know that just about a year and a half ago yields got down to 136. that's about another 50 basis points lower from here. >> wow. okay. mike, what's your take on what's happening with stocks? talk about volatility, and some people say, you know, use
volatility as your friend, but how do you do that? >>. >> let's view that as yet another pullback in a reasonable environment for stocks. all of our work. there's not a lot of financial stress building up. we are worried about the volatility, but we do think it's simply another sign of relatively high valuations. the rest of the world struggling, but, you know, the key here for stocks is going to be this quarterly earnings report. i think it's going to be the most watched and the most anticipated in quite some time because the market does feel heavy. even if we get decent segment pullback, let's say 5% or 7% or 8% or 9%, we think it will be contained there. if earnings come in worse than expected, it could turn into something more of a rout. >> considering how much the bar has been lowered, already earnings expectations are being racheted down so much, the potential for a possible surprise is getting higher. >> that's exactly right.
we've seen this happen over the last four, five, six quarters. estimates come down into the earnings season. nobody wants to be caught long. on the high side, and the earnings estimates. estimates come down, pushing down expectations. companies come out and win. i think the difference this time is the u.s. dollar. with the dollar's strength, multi-national corporations will have a tough time. i think oil companies will probably start to see that trickle into oil earnings. certainly, next quarter for sure probably not quite that this quarter, but that will be a bearish toem tone to what we hear from the multi-national. the software companies and big tech companies, some of the big consumer products companies. i think we're going to hear a lot of that. the question is how much is the market pricing that in. >> good question. what's your answer? how much has the market priced it in? >> i think a fair amount. again, we're in relatively optimistic. we're more dovish on what the federal reserve is going to do. we think that earnings will continue to grow a little bit stronger than most expect. particularly as you point out lowered expectations. wouldn't surprise us at all if
the january pullback turns out to be what happened three or four times last year where we had 6% or 7% pullbacks. nothing great, and frankly, it was an opportunity to buy. we don't see any reason why this time around should be different. >> john, final question to you. what do you think the federal reserve is going to do? increasingly it feels like the market is pushing back the timetable with the very first rate hike. is it possible the 2016 might be the next stop? >> yeah. i previously thought the fed would try to move quickly, but i would have to push that back. ultimately, the fed still has an orthodoxy of looking at the inflation rates. we're probably looking at negative inflation rates. almost impossible for the fed to tighten when inflation rates are negative. >> well, we'll see. john, mike, thank you very much for joining us. interesting times we're in right now. what do the people in canada think about our neverending no decision on the keystone pipe lien? brian sullivan, still in calgary, canada, and he is about
to talk to the ceo of transcanada. the dow down by 233 points. you say 233 points. however, we were well over 300 to the down side earlier on today. as i say, we're pairing the losses. we'll see how much we can do that towards the end of trading. stick around. n line and you'll see just how much it has to offer, especially if you're thinking of moving an old 401(k) to a fidelity ira. it gives you a wide range of investment options... and the free help you need to make sure your investments fit your goals -- and what you're really investing for. tap into the full power of your fidelity green line. call today and we'll make it easy to move that old 401(k) to a fidelity rollover ira.
welcome back to street signs. we've been down most of the day, but not for the last couple of minutes. big rapid spike in the price of oil. in fact, crude oil up about 3% in just a matter of five to ten minutes heading into the close at about $47.40. kind of an odd spike in oil. the cnbc team is going to dig into that and try to figure out more about why we're seeing this big hit in oil at the close of the day. we'll let you know once it closes. an interesting spike in the price of oil. small comfort, by the way, everybody, for the canadian, u.s. oil producers. no one predicted we would be down in the $40 a barrel range from six months ago. let's bring in a guy who knows a lot about oil and the economy. peter, chief economist at art financial following the oil markets and the canadian and
global economies for years. >> the supply in places like qana for drilling coming in is a production surge. there's a bit of an imbalance, and the saudis are in it. this is a price war. this is what happens. prices go down below the marginal cost. >> we are offering a lot of oil to the world markets, but, you know, when you have a price war, all producers try to offset the revenue lost by producing more, so it's a free for all for the moment. you know, until we start to see
some of the participants in this global thing start to die off, we're going to see low prices. >> you know, we look to the saudis, and saudi advisory said, listen, if oil goes in the 20s, there's nothing we can do about it. it'sen our fault, effectively. i read something from wolf research that basically said they were surprised that the saudis were not letting the market down gently, but rather, trying to pop the oil balloon. kind of like 1986. is that a fair statement? >> i think that's what's happening, and i think you'll see a lot of corporate distress. we already are. bankruptcies and so on. you know, the important thing in the united states is that they're not going to put the business out of business. that's because the largest
producer was big off shore, big oil sands. arctic. that kind of stuff. that stuff takes years to develop and bring on. these were big projects required. >> what's going to be the macro? we're going to talk more about this tomorrow. we'll be live in toronto. what's going to be the macroimpact on the can addian economy? look at all the buildings being built in calgary? >> it's going to be ugly here as it is in places like houston and oklahoma. $150 billion to under $100 billion. cash flow will be down drch if it sustains. spending is going to dry up. when spending dries up -- >> well, spending -- >> well, i mean, it's going to -- >> it was a significant opponent -- >> the big news really is here in the oil business spending is really going to dry up for a few months. >> well, i guess it's a small upside and the fact that your dollar, canadian dollar has
taijed against the u.s. dollar, and no one wants to see the currency fall. as an exporter of oil, does it ease the pain a little bit here? >> that eases the pane. no question about it. weave gone from the high 80s to 88, almost 08 cents to the u.s. dollar. also, royalty rates slide down by virtue -- that's a mitigating hedging factor. >> you see stocks at 60% -- >> some will be down 100%. >> peter. >> thank you, brian. stroo do appreciate that very much. >> people are saying we're going to be fine long-term, but there are going to be companies that simply go away. i don't think anybody projected this drop here. many up after the break. what is also interesting, folks, and i'll tell you this, is that
yesterday in canada you had two major government officials come out and speak to the price of oil. deputy governor tim lane, and you also had the premier of alberta comout. jim prentice. this is front page news up in canada. matters to america. not just for the economy but the stock perspective as well. we have leading investment bank ner canada in the oil space coming up on street signs. we are live in calgary. we're digging into oil. we're dig intoing the macroeconomic impacts, and the dow is down big today as well. we're back after this short break. i have the worst cold with this runny nose. i better take something. dayquill cold and flu doesn't treat your runny nose. seriously? alka-seltzer plus cold and cough fights your worst cold symptoms plus your runny nose. oh, what a relief it is. your mom's got your back. your friends have your back. your dog's definitely got your back. but who's got your back when you need legal help? we do. we're legalzoom, and over the last 10 years,
we've helped millions of people protect their families and run their businesses. we have the right people on-hand to answer your questions, backed by a trusted network of attorneys. so visit us today for legal help you can count on. legalzoom. legal help is here. you know.... there's a more enjoyable way to get your fiber. try phillips fiber good gummies. they're delicious and an excellent source of fiber to help support regularity. mmmm. these are good! the tasty side of fiber. from phillips and you can move the world. ♪ but to get from the old way to the new, you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come.
>> wack back. what are you looking at there is a -- wti, this is incredible. up by 5.5%. really spiking. you can see the very clear spike on the chart. heading into the oil lows. the dow is down 1.2%. as wti has been moving up, we've also seen the losses on the dow being cleared. let's get to jackie deangeles at the nymex to get more on the settled price. what do people feel caused this major spikes towards the end of tragdz, jackie? >> good afternoon to you. well, that's a great question. the first answer to it is that we do have options expiration today, and i have been saying that since yesterday. that does cause volatility.
usually to the upside. now, today was a particularly sort of back and forth between positive and negative territory day where we had some date wra today moving the numbers around as well. options probably triggering this buying action as we go into the close, and the other thing is we've been seeing this intense pattern of buying or selling right as we head into that 2:30 close. no surprise that it happened here to the up side today. again, most traders are saying this is technical. not necessarily fundamental in the market that caused this move higher. back to you. >> okay. thank you very much for explaining it to us. jackie deevening less, very interesting move going on there. let's take a look at copper as well. crashing to a five and a half year low today. our next guests says it could fall another 15% this year. what is it signalling about the u.s. economy? chief global strategist with citi index. what's it saying about the chinese economies. isn't that more about copper and the u.s. economy? >> you know, when the copper
decline began or the last five to six months, the intensity began last night, and something, though, is not really talked so much about was the decline of the chinese imports. everybody is talking about the world bank report. the export fell for the six month out of the last nine months. the trade balance came out fine. what matters is the world's biggest buyer of the copper, and basically the six monthly decline out of the last nine months, this was not seen. last time it was seen was in 2009 crash. basically so this means quite a lot. there is no secret that china is in the midst of a slowdown. whether it's a soft landing or it's a hard landing. that hes not the big issue. what we are worried is that when it slows further, if the chinese
yuan weakens further, it will be an export of deflation, and it will complicate the work of the ecb, and even put probably the fed into a disinflation, and the weekend -- the rate hike can be kissed good-bye, and yields will continue to head lower. >> what does it mean for the united states? you say it's got policy implications here and will possibly push back the rate hike. what does it mean for the stock market as well? >> look, as long as the market continues to believe the story that it is going to raise rates, the bond yields are not going to go up. they're going to go down. the bond market cannot handle higher interest rates. the bond market is saying we are slowing. as it further -- as this happens, any talk that there is -- that there is talk of a
potential rate hike, yields are going to come down. tll will be a certain point where the stocks to yield ratio will no longer go up, and it would push down. what does this mean for the u.s. economy? right now the u.s. economy is, so to speak, the importer of the last resort, like we saw in the mid 2000. it may hurt the cutbacks for the miners, but it won't be as much as of a problem as it is on the oil cutbacks in the u.s.
>> the dow moving off those lows. on the oil turnaround. what is this play with all this volatility on set with me is billery and co and david speaker with westwood funds. you're in the camp, i believe, lamar, that says, look, let this volatility work for you. try to make it your friend. you can't do anything about it. it's here whether we like it or not. what do you do with it in the meantime? >> we're looking to find where can we get value here? stocks have had a long run. this is an opportunity for names that we've been looking at. we're excited about it. just haven't been able to get comfortable with where they were value weighings-wise. today some of the things are trading off. this is great opportunity for us to buy. do you think you would stay clear on oil stocks until the smoke has cleared? >> i don't think you want to be completely clear. we're certainly underweight in oil and i think that's probably where we're comfortable, but i
don't think a zero exposure to oil is a prudent thing to do for investors because it can come up just as questionabling or more quickly than it went down. >> david, what are you doing with this market, and to what degree are the fortunes still tied with the vagueries of what's happening with oil? maybe just maybe we can start to focus more on earnings instead. >> we would like to start focussing more on earnings. with earnings season underway, we'll have an opportunity to do that. oil weakness, we'll have an impact on earnings. >> the volatility has created active management. we got tired of this six years of excess he havely low rates and excessively low volatility that the fed had manipulated,
and now we have a much better opportunity to generate alpha in our portfolio. >> you like consumer discretion. you think the lower gasoline prices will help the consumer and has helped the consumer. you also said, and this is what the retail sales showed, that actually the lower gasoline prices didn't help the consumer. at least not in the way that we were expecting. why are you confident that it eventually will. hence, your consumer discretionary bet? >> that was the month of december. the fourth quarter we saw relatively strong retail sales. we saw relatively strong christmas sales. consumer confidence continues to go up. if you combine improving employment with low prices at the pump, low interest rates, strong dollar, all that is positive for the consumer. i think one thing the consumer is waiting on, though, is they want to make sure this is going to stick because we're not used to sub $2 prices at the pump. this is crazy. i go to the pump, and i can't believe how cheap gas is. i want another tank to fill up it's so cheap. i think consumers are waiting for the bottom to fall out and
for oil prices to spike back up. a couple more months of this. >> let's get back to your stock picks. i know you like howard hughes, lkq. what sticks out for you? >> for example, with lkq, they provide after market auto parts collision repair centers. people are driving more, and the price of gasoline gets cut in half, and the number of road miles can shoot up, and unfortunately, the more people drive, the more they run into each other. that's going to be an opportunity for that one. then howard hughes, that one has come in because a couple of the major projects are actually outside of houston.
thank you very much for joining us. well, going back out to brian in canada where he is going to be joined by the ceo of first energy capital. who are they? that's the top lender to those big canadian oil companies. really no one is in a better position to talk about the economic impact than he is. also, we have the verdict of that big retail bet between courtney reagan and steve leesman. we're going to tell you who won. stay with us. nk no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda.
welcome back to "street signs." we're live in calgary, alberta, canada, talking about the oil story. a bizarre spike in the price of oil as bob and manned yea and jackie have been reporting. coming into the close. could be option-related. still, if oil goes up a little today, it has been absolute haircut of the price of oil over the last six months, and one of the reasons that we're in canada today is because there's so many major canadian players, a, that are not part of the oil scene, but also that trade in the united states. here are a couple of names. i want to show you some very dramatic price drops, everyone. you have pen west petroleum, and some others who have lost 40% or 50% or 60% of their market value in just a matter of months.
those are canadian companies based roofer, but also trading in america, but they're not the only ones, folks. this is why we're in calgary. look at this map. there are many different canadian companies that trade on the new york stock exchange and the nasdaq. those are some of the more extreme examples, but these are extreme, none the leshgs and let's bring in a guy that knows about the capital markets, equity markets here, and the oil markets. john chambers, ceo of first energy capital, leading investment bank focussing on everything in canada. thank you for joining us. >> thank you for having me. sfroo listen, if we had -- we've had some producers in america that are down big, but when i look at major canadian companies, down 60% in six months, it seems like nothing short of a disaster. >> it's been very difficult. we've seen casual forecasts drop dramatically from the third quarter. >> those companies that are heavily oil leveraged and had have a heavier grade of oil are going to find that their share
prices are going to pull back. we've seen that in the market. >> i know you're not going to name names, but do you feel that some of the moves in this one company is down 80% in six months. do you feel like those are fair reactions by the market? >> well, in this type of situation there's always, always overreaction. i think there's a lot of overreaction in this market. although certainly some serious downturns are warranted. if you look at the companies that are subject to the most significant downturns, generally they have the highest amount of leverage. >> you find it from 2016 with an ongoing business plan and profitable business. >> the big problem in america, if we've been reporting for weeks now, is lemplg. the debt that is being used. a lot of it is junk debt being used to finance these companies.
too that's part of the an indicatedian psyche. you have a lot of volatility in your pricing points because effectively we're at the end of the pipeline in north america. canadian companies tend to run lighter leverage, and as a result, they probably have a little more flexibility. many of them have more flexibility coming into the down turn. that's not to say there's going to be train wrecks because for sure some companies have very high leverage, and they're going to have to merge themselves out and sell assets. there's going to be a lot of m&a activity happening. >> you anticipate a wave of deals. i mean, you're an investment banker. a wave of deals happening. you're either big canadian companies buying smaller ones or maybe big u.s. companies or global integrateds coming in. >> also, i think you're going to see merger activity in the midcap market in canada.
>> most of this is probably going to take three to six months before it really kicks in because people are still trying to figure out where commodity prices are going. the decline in canadian dlashg the strength of the u.s. dollar also helps the economics when you have some of the american companies. >> the canadian oel industry will survive. >> yeah, absolutely. >> were you surprised by this, though, the rapidity of the drop? not you, but the industry? >> i think everybody was caught off guard. the quickness with which the commodity prices dropped shocked everybody, and we talked about it a lot. we couldn't think of a scenario where we had seen commodity prices drop as quickly and as hard and had as large an impact as we've had in this particular down turn. >> john chambers, i appreciate you coming out. thank you very much. my pleasure. >> take care. all right. there you go, folks. an insider's view of the markets. deals are likely to come. you have some of the major canadian companies that also, by the way, trade in the u.s. there are more than 15 companies that are based here that trade
in the new york stock exchange, nasdaq. likely to either merge with each other or get bought by a bigger player. some companies may simply go away. we'll go to a short commercial break and be back with more "street signs" right after this. beautiful inglewood, new jersey. calgary, alberta, canada. back after this. ♪ the all new, head turning cadillac ats coupe. it's irresistible. ♪
courtney, you and steve have actually made a bet, quite a big bet, over how well retailers will do. you have some money on the table, the losing team has to donate so the other's charity. the national retail federation is predicting holiday sales growth of 4.1% and you think it's going to come in lower. steve, you think that number is going to come in higher. >> well, that was back on november the 26th when the bet was placed here on the show and now it is time to announce the winner. drum roll, please.
the winner is courtney reagan. the nrf announced a 4% gain in holiday sales this last season. just shy of their forecasted 4.1% sales growth. so steve liesman, you lost by 0.1%, a hair. >> yeah, let's be clear about the loss here. first of all, my first affirmative defense is i am demanding a recount. the second is i'll get it back in the revisions. the third is if i lose by 0.1% on a strong 4% number, you know what? that's fine. and you know what? i have one more thing to say, which is part of the loss is i have to make a donation to courtney's charity, which is the american cancer society. i don't feel bad about that for a second. the final one is i get to have dinner with courtney which is part of the bet. >> wait, and me? >> how much of a loser can i be. if you join, i'm even more of a winner so i'm fine with that loss. >> we're all winners. >> exactly. i was sort of looking at the entire backdrop and saying, yes, there are lower gas prices but i have never thought that was going to be enough to tip the scales. i think it makes you feel better. i don't think you necessarily take that $15 savings per week
and plow it back into buying something like a sweater. we have higher health care costs and tuition costs. and also retailers were a lot more cautious than i felt like economists were. >> can i submit the jury is still just a little out. i'll tell yu. october/november were strong. according to estimates i'm reading now, we'll do 4.2% consumer spending growth or over 4% in the fourth quarter which would be the best consumer spending quarter of the post great recession period. so here is the deal. december you were correct. they took a break. a lot of that gas money didn't look like it was plowed in to other sales. but i would just submit the jury is still out a little bit. we'll see what happens in january. >> i hope you're right because i want folks to spend and i want retail sales to go up. i just know a lot of people still feel like they are in a personal recession. they don't feel that great about -- >> and layer in other costs, things like rising health insurance, other issues, could be sapping some of that strength
away. it's worth watching. >> i feel like this bet has a few legs. we have to wait for the revisions. we will revis sit the revisions later on in the show. thank you, courtney and steve. we're heading north, far north. all the way up to calgary in canada for more from brian and we'll tell where you in the world he's going to be for tomorrow's show. it's like where's waldo. stay with us. ameriprise asked people a simple question: in retirement, will you have enough money to live life on your terms? i sure hope so. with healthcare costs, who knows. umm... everyone has retirement questions. so ameriprise created the exclusive confident retirement approach. now you and your ameripise advisor.... can get the real answers you need. start building your confident retirement today. sometimes they just drop in. always obvious.
cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. i have been at this for 30
years. i have been involved in cross border trade between canada and the united states my whole career. i never recognized there was a border between our two countries until this issue arose. there's been this great trading relationship that we've had which now is -- the question really is does the u.s. want canadian oil or not? we deliver it 3 million barrels a day today. the question is does it want 3 million barrels a day from canada or does it want 3 million barrels a day from some place else? >> that was russ gurling. they are the parent company of the keystone pipeline. you can hear in his voice he was a little frustrated. basically saying that this has been a six, seven-year process and he was struggling to get through some of the hurdles that remain. although they are optimistic the keystone will eventually get built, there's obviously a lot of discontent with that pipeline among certain circles in america as well. a hot button issue part as well. but i think mandy he brings up an interesting point about trade. one of the reasons we're here is not just the oil story or the stock story. i will repeat myself and we will talk more about it tomorrow,
this, canada, is america's largest trading partner. 300-plus billion dollars worth of american goods come north. if the canadian economy slows down because of what's happening in oil it could have an impact on u.s. companies doing business here. this is our number one trading partner is canada. >> we're very interconnected. you mentioned tomorrow what you're going to be talking about but you didn't mention where you were going to be, brian. you have been in all these cold places like north dakota and calgary. please tell me it's something like hawaii but i'm guessing it's not, right? >> you know, i was actually thinking that after the balkan where it was minus 20 maybe i would pitch a week-long deep dive in how the oil impact is affecting the macadamia crop in hawaii. don't see cnbc going for that. but i am going to an airport tonight which is also a fantastic song by the canadian band rush, one of my favorites, yyz. we're going to be in tonight.
why? this is more of the oil impact. calgary, they're all based here. toronto tomorrow, macro canada, real estate, consumer, retail. this is a major global economy on its own. more than 70 companies, mandy, that are based in canada trade in the united states as well. so not just an economic impact, but a stock impact, so, unfortunately, not as warm but -- and let me clear something up by the way because i have been taking some flack. people say your guests are all in suits and you're in a jacket with a suit. you're a woouss. that is true. we have been here since 5:00 in the morning. our crew has been here since 3:30. it was a lot colder then. i'm just throwing that out there. >> i will take the wuss comment back as well. brian, we're looking forward to seeing you tomorrow. thank you very much. great job. but let's take a look at the dow before we let you guys go. oka okay. bring up this board. at the lows of the day we are
down as much as 330 points. now we're down by 263 and it's being attributed to a number of things, including in large part to the big spike higher that we saw in oil as it was going towards its setting at 2:30 eastern. thank you for watching "street signs." "the closing bell" is next. see you tomorrow. >> and welcome to "the closing bell." i'm kelly evans and what a day it's been yet again down here at the new york stock exchange. >> i'm bill griffeth. if you thought yesterday was fun and interesting, wait until you hear about today. the white knuckle ride continues. red arrows abound at least for equities. oil is a different story late today, but there's the industrial average which was down more than 300 points about an hour ago, now down 262, and right now roughly speaking, broad terms, the major averages are down a little over 4% right now from their most recent all-time highs. >> well, actually people talking about the